Croatia’s Prime Minister Andrej Plenković tweeted that through Croatia’s accession to the euro zone, its citizens “will be better protected against crises.”
While the cost of doing business in Europe has increased dramatically in the last year, the euro has also lost value against the dollar. The depreciation benefits euro-zone exports to America.
When a currency depreciates, it can lead to a self-reinforcing outflow of capital—especially when the depreciation is unprecedented. The euro has never been this weak against the dollar.
In the first quarter of this year, the euro area ran a combined trade and financial deficit vs. Russia of €-26 billion. Only the deficit vs. China was bigger, at €-38.8 billion.
As Croatia’s lawmakers enter the final stretch toward euro membership, it is essential that they understand exactly what happened in Greece, and why. In five short years, 2009-2014, the Greek economy imploded: one quarter of it vanished. This was a direct result of the austerity packages that the EU and the ECB forced upon the government in Athens. What will Croatia do to avoid ending up in the same trap as Greece?
Bloomberg suggests that consumers “sitting on 700 billion-euro ($753 billion) cash” is reason enough to predict macroeconomic resiliency in Europe, but this report is contradicted by findings by Eurostat on retail trade in the euro area and the EU as a whole.
